Over the course of my career, I’ve been fortunate to guide more than 200 law firms to new heights of success. My role as a legal consultant gives me visibility into their operations, technology, strategic plans and business culture. I find it very gratifying to help these firms align their technology strategy with their business goals and watch them reap the benefits. This is very rewarding to me.
However, serving all of these clients has taught me one key lesson that I think can really benefit your law firm. Most firms are unique in terms of clientele served, operating model, market niche and culture. But nearly every firm I’ve served has had the same mindset when it comes to technology. They take a reactive, rather than proactive, technology stance.
This is a very costly mistake – one that you can avoid – that produces all sorts of negative situations. After reflecting on the last dozen or so law firms that I’ve counseled, I compiled five reasons that your firm should take a proactive technology stance and how this shift in mindset will pay huge dividends.
THE 5 BENEFITS
Before I introduce the five key benefits, I want to define what I mean by proactive. To me, a proactive technology stance means that you are:
- Keeping existing technology systems patched and up to date.
- Consistently upgrading systems long before they approach end-of-life, degraded performance or obsolescence.
- Evaluating new technologies, especially cloud-based apps, that could give you competitive advantage.
- Bought into the notion that staying on the cutting-edge of technology is crucial to your firm’s future and market position. This is just part of your culture.
- Aligned in your technology strategy and your business strategy, where technology is a key contributor to your growth.
After consulting with numerous firms who have changed their mindset from reactive to proactive, I have come to identify five major benefits:
- Lower Total Cost of Ownership (TCO)
- Reduced Cyber Risk
- Scalability to Adapt to Opportunity
- Ability to produce Client delight
- Better Lawyering and Firm Productivity
Most law firms have a highly inaccurate picture of their total cost of ownership for technology. Whatever you think that number might be, triple it and you're probably close.
LOWER TOTAL COST OF OWNERSHIP (TCO)
In my experience, most law firms have a highly inaccurate picture of their TCO. In fact, when I first begin engaging with a law firm, I’ll ask them to project their TCO. One of the first things I discover is that no one person, in most instances, actually owns TCO, takes responsibility to understand the full range of costs and tracks actual expenditures against planned budgets. In other words, no one can accurately project TCO.
After I ask the question – what’s your TCO – I often see people pull up last year’s budget calculations which after analysis always differ from their actual expenditures. Here is what I’ve learned and now propose as a guiding principle. Whatever you think your TCO is, triple that number and you’re probably close.
A great TCO analysis will take into account at least these core expenditures:
- Hardware costs – initial investment and costs to maintain. These can include laptops, desktops, servers, network devices (switches, hubs, routers, WIFI, LAN, WAN) and storage systems (online, near-line, off-line).
- Software costs – license fees for both on-premise and cloud apps across your enterprise. These can include document management systems, time and billing systems, practice management systems, office apps and so much more.
- eDiscovery costs – these can include cost of hardware, software and service fees dedicated to the eDiscovery function.
- Cyber security costs – these can include cost of training staff, costs of email monitoring, document monitoring and network monitoring software licenses, costs of any consultants in this area.
- Internet and communication costs – these include ISP fees, telephone land line fees, mobile phones and more.
- Human costs – these can include the cost of IT staff annual salary, cost of consultants or specialists in certain areas, cost of maintenance agreements with vendors.
- Space allocation costs – these can include square footage, power and associated operating expenses.
As you can see, the list of costs likely includes more line-items than what you might have projected. Yet, these line-items add up to your actual cost of ownership – what you actually pay for technology as a function. But even that is not likely the biggest cost to your firm.
In my experience, the biggest cost from technology is not hard cost but opportunity cost. These can include:
- Experiencing tremendous duress and lost productivity during client technology audits, which seem to be more invasive every year.
- Walking away from certain types of deals because you are not confident your firm could handle the technology component of the work.
- Getting negative publicity after being hacked and losing client data.
- Key employees moving on to competitors because they were tired of an arcane technology ecosystem.
I’ve seen all of these situations cost law firms far more than the actual hard costs that can be projected in a TCO analysis. But here’s the thing – this does not have to be the case. Law firms who take a proactive technology stance – who commit to being on the cutting edge of technology – actually realize a lower TCO while experiencing happier and more productive employees and greatly reduced cyber security risks.
REDUCED CYBER RISK
No matter what practice areas your law firm focuses on, you are now in the document management business. The rise of electronic data means more data sources and more data responsive to discovery requests. This, in turn, means more data being stored by outside counsel for review. The more data your law firm houses, the more risk you carry should a cyber incident occur. There is too much at stake for your law firm to ignore cyber security. But I see this happening all the time.
I’ve received calls from stressed out law firm leaders who know they can’t comply with a client audit. Others have been breached and need to notify clients or have lost funds either through paying ransomware or an intercepted wire transfer. In most instances, there were precipitating events that indicated a major problem would crop up in the future – but the telltale signs were ignored.
I wish I could say with confidence that cyber incidents can be avoided. A lot of firms being breached have the financial means to prevent attacks. Ironically, many of them even have cyber security divisions or practice groups, but it still happens.
In 2011, I was invited to hear Frank Abagnale Jr. speak in Charleston, SC at an Infraguard Member Alliance event. At that time, I didn’t fully understand his position when he said “it’s no longer a matter of if you get hacked, it’s when.” Fast-forward to 2017 and it’s become very clear to me.
Waiting for an incident to occur before taking responsibility can be catastrophic to your firm. I see loss of clients and weakened law firm brands as the top two results. According to Malware Bytes’ Second Annual State of Ransomware report, “20% of companies hit with ransomware were unable to sustain the threat and forced to close its doors.”
The LOGICFORCE Law Firm Cyber Security Scorecard presents 12 de facto cyber standards that your firm could begin to adopt today. I strongly urge you to download this report and become proactive in identifying and addressing your cyber threats.
It’s no longer a matter of “if” you get hacked, it’s “when” you get hacked.
SCALABILITY TO ADAPT TO OPPORTUNITY
Competition is fierce in the legal space with firms doing everything possible to realize a competitive edge. Your law firm must be in position to take advantage of opportunities when they arise. This can mean diversifying your services, firm mergers, large new deals or simply bringing on new staff.
All of these examples have an impact on your firm’s IT ecosystem. Whether it is simply adding hardware and licenses for new employees or adding applications to support practice groups so that they can work with certain clients, you need a technology strategy that allows you to adapt quickly.
If you have arcane technology systems that do not integrate well with each other or with best-in-class applications today, you are in trouble. You need a scalable technology architecture that will allow you to pivot in any direction necessary with as little effort as necessary. This is especially problematic for law firms who have gone through several mergers without a well-conceived technology integration strategy.
A proactive technology mindset creates parsimony across your IT ecosystem. When everyone shares the same great technology and understands how to use it – you win. This makes it fast and easy to add new teams, new applications and new levels of productivity.
ABILITY TO PRODUCE CLIENT DELIGHT
Lisa Konie, Senior Director of Legal Operations at Adobe Systems, recently delivered the keynote address at NASHTECH, our industry conference. She is responsible for managing the Adobe Legal and Government Relations (LGR) global departmental operations, which includes everything from strategic planning and outside counsel relationships to the LGR interactive website. Her keynote speech was called – How To Win My Business.
One of Lisa’s key points is that law firms need to be in the business of delivering client delight. In fact, it was the first of 3 rules she recommended that law firms adopt:
- Rule 1: delight your customer
- Rule 2: embrace the power of data
- Rule 3: break out of your comfort zone
The point she made is that all of these rules intersect and they depend on technology. She gave an example of a firm who charged her $1.9 million dollars to resolve a certain type of matter. Another firm resolved a similar type of matter for less than $100,000. Which firm do you think gets repeat business from her? Which firm does she trust and recommend?
My counsel to you is to adopt the technology that will allow you to demonstrate transparency of your matters and billing practices with your clients. Show them the number of matters completed and in play right now. Show them the disposition of the matters and who from your team is working on them. Show your fee structure and what you’ve been able to deliver for the dollar. Do this and you will produce client delight and trust.
Technology makes this possible. Lisa Konie acknowledges that not all law firms are going to survive this new cost-conscious world, which she describes as a tsunami of change. But the technology is available right now for firms who are ready to make this transition.
This may be the single biggest reason to adopt a proactive technology mindset. I believe that successful law firms of the future will mirror their corporate clients by being able to do more with less. Small teams will be twice as productive as teams many times their size today. A team of 10 will do more work in less time than it used to take a team of 40. There are two primary reasons this will happen:
- The marketplace is demanding it. Clients want lower fees and better transparency.
- Law firms will have to do this to be profitable. There are no areas left from which to squeeze profits.
The only way small teams will do more with less is by adopting the technologies that make this possible. Those technologies are available today in abundance, but you have to be ready for them and seeking ways to integrate them into your IT ecosystem. This is why you need a proactive technology mindset.
WHAT TO DO NEXT
If you’d like to learn how to do this, I have a recommendation for a next step. My colleagues have written a very insightful and free e-book called Ten Strategies To Add Ten Million Dollars To Your Law Firm. This great e-book gives you more ideas than I have time or space to outline in this article. If what I’ve said in this article resonates with you, you’ll love the free e-book.